Exhibit 10.1


 


REDWOOD TRUST, INC.


PERFORMANCE STOCK UNIT AWARD AGREEMENT


 


PERFORMANCE STOCK UNIT AWARD
AGREEMENT dated as of the __ day of ____, 20__ (the “Award Agreement”), by and between Redwood Trust, Inc., a Maryland
corporation (the “Company”), and ______, an employee of the Company (the “Participant”).


 


Pursuant to the Redwood
Trust, Inc. 2014 Incentive Award Plan (as it may be amended from time to time, the “Plan”), the Compensation
Committee (the “Committee”) of the Board of Directors of the Company has determined that the Participant is to be
granted a Performance Stock Unit award for shares of the Company’s common stock, par value $0.01 per share
(“Common Stock”) on the terms and conditions set forth herein and on Exhibit A hereto (the
“Award”), and the Company hereby grants such Award.  This Award is being made in connection with a
deferral of compensation by the Participant pursuant to the Redwood Trust, Inc. Executive Deferred Compensation Plan (the
“Deferred Compensation Plan”) and the executed Deferral Election attached hereto as Exhibit B (the
“Deferral Election”). Any capitalized terms not defined herein shall have the meaning set forth in the Plan or
the Deferred Compensation Plan, as applicable.


 


1.          Number
of Performance Stock Units Awarded.   This Award Agreement sets forth the terms and conditions of a
Performance Stock Unit Award with a target award of ______ shares of Common Stock, as the same may be adjusted to
reflect cash dividends declared on the Common Stock pursuant to Section 2 (the “Target Shares”).  The
Award shall be divided into four tranches of an equal number of Target Shares, with the number of Target Shares per tranche
and the associated Performance Period (as defined below) set forth in Exhibit A hereto. The number of units
representing shares of Common Stock that shall be credited to the Participant’s Deferral Account pursuant to this Award
(the “Award Shares”) shall be determined based upon the Company’s achievement of the Performance Goals set
forth in Exhibit A hereto (the “Performance Goals”) and may range from [zero] percent ([0]%) to [two
hundred] percent ([200]%) of the Target Shares.


 


2.          
Effect of Dividends on Target Shares.   Except as set forth under the heading “Dividends” in
Exhibit A hereto, on the applicable vesting date, the number of Target Shares for each tranche set forth in Exhibit A
shall automatically be increased to reflect all cash dividends, if any, which have been declared and/or paid to all or substantially
all holders of the outstanding shares of Common Stock during the period beginning on the date of this Award Agreement and ending
on the vesting date (the “Dividend Vesting Period”).  On such date, the Target Shares for each tranche shall
be automatically increased by an aggregate number of shares determined by multiplying (x) the number of Target Shares for each
tranche set forth in Exhibit A by (y) the Target Share Dividend Reinvestment Factor (as defined below).


 


“Target Share Dividend
Reinvestment Factor” shall mean the number of shares of Common Stock that would have been acquired from the reinvestment
of cash dividends, if any, which have been declared and/or paid to all or substantially all holders of the outstanding shares of
Common Stock during the Dividend Vesting Period, with respect to one share of Common Stock outstanding on the first day of the
Dividend Vesting Period.   Such number of shares shall be determined cumulatively, for each cash dividend declared
and/or paid during the Dividend Vesting Period (beginning with the first cash dividend declared and/or paid during the Dividend
Vesting Period and continuing chronologically with each subsequent cash dividend declared and/or paid during the Dividend Vesting
Period (and in each case other than the first such cash dividend, taking into account any increase in shares resulting from the
application of this formula to the chronologically immediately preceding cash dividend)), by multiplying (i) the applicable number
of shares of Common Stock immediately prior to the record date of such cash dividend (which in the case of the first cash dividend
paid during the Dividend Vesting Period shall be one) by (ii) the per share amount of such cash dividend and dividing the product
by the Fair Market Value per share of Common Stock on the payment date of such dividend (or if such payment date is subsequent
to the end of the Dividend Vesting Period, the Fair Market Value per share of Common Stock on the last day of the Dividend Vesting
Period).


 


Any amounts that may become
payable in respect of this Section 2 shall be treated separately from the Award Shares and the rights arising in connection therewith
for purposes of Section 409A of the Code.


 




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3.          Vesting
and Payment of Award.   The Award Shares shall vest and be credited as set forth in Exhibit A, if at all,
provided that the Committee determines, in its sole discretion, whether and to what extent the Performance Goals set forth in Exhibit
A have been attained.  The crediting of the Award Shares is contingent on the attainment of the Performance Goals
as set forth on Exhibit A.  In connection with such determination by the Committee and subject to the provisions
of the Plan and this Award Agreement (including Exhibit A), the Participant shall be entitled to crediting of that portion
of the Performance Stock Units as corresponds to the Performance Goals attained (as determined by the Committee in its sole discretion)
as set forth on Exhibit A.


  


No Award Shares shall be credited
to the Participant’s Deferral Account unless the Committee determines, in its sole discretion, whether and to what extent
the Performance Goals set forth in Exhibit A have been attained and the number of Award Shares earned pursuant to the Award
have been determined and have vested in accordance with the provisions of Exhibit A.  Any shares of Common Stock
in respect of Award Shares vested and credited to the Participant’s Deferral Account shall be delivered to the Participant
at the time or times provided in the Deferral Election and the Deferred Compensation Plan (or any re-deferral election made in
accordance with Section 409A of the Code and the terms of the Deferred Compensation Plan).  [In connection with the delivery
of Award Shares to the Participant, the Participant and the Company agree that delivery of such Award Shares shall be net of a
number of such shares which shall be forfeited by the Participant in order to satisfy the applicable tax withholding obligation
relating to such delivery to the Participant.]


 


4.          Forfeiture
of Performance Stock Units.   


 


(a)         Except
as otherwise may be provided in Exhibit A under subclause (i) of “Vesting (Change in Control)”, upon (i) the
Participant’s Retirement (as defined below) or (ii) the Participant’s Termination of Service as an Employee by the
Company without Cause (as defined below), in any case, prior to expiration of the three year period beginning on the date of this
Award Agreement (the “Vesting Period”), the Target Shares shall be reduced on a pro-rata basis to reflect the number
of days of employment completed during the Vesting Period. In the event any such termination occurs prior to the end of an applicable
Performance Period, the Award tranche related to such Performance Period shall continue to be eligible to vest and become payable
based on such prorated number of Target Shares for such tranche and the Performance Goals in accordance with the provisions of
Exhibit A.


 


(b)         Upon
the Participant’s Termination of Service as an Employee due to death or Disability (or, if the Participant is party
to an employment agreement with the Company, in accordance with such employment agreement in the case of a Termination
of Service for “Good Reason”, as defined in such employment agreement) prior to expiration of the Vesting Period, the
Target Shares shall not be reduced. In the event any such termination occurs prior to the end of an applicable Performance
Period, the Award tranche related to such Performance Period shall continue to be eligible to vest and become payable based
on the number of Target Shares for such tranche and the Performance Goals in accordance with the provisions of Exhibit
A.  


 


(c)         Except
as otherwise may be provided in Exhibit A hereto or in an employment agreement between the Participant and the Company,
upon the Participant’s Termination of Service as an Employee for any reason other than death, Disability, Retirement or without
Cause, prior to expiration of the Vesting Period, all Award Shares shall become ineligible for crediting to the Participant’s
Deferral Account and shall be forfeited.  


 


(d)         Any
Award Shares which have vested and been credited to the Participant’s Deferral Account prior to (or in connection with) the
Participant’s Termination of Service as an Employee shall not be forfeited in the event of such Termination of Service as
an Employee but rather delivery of such shares shall continue to be governed by the terms of the Deferral Election and the Deferred
Compensation Plan (or any re-deferral election made in accordance with Section 409A of the Code and the terms of the Deferred Compensation
Plan).


 


For purposes of this Award
Agreement, “Cause” shall mean (i) the Participant’s material failure to substantially perform the reasonable
and lawful duties of his or her position for the Company, which failure shall continue for thirty (30) days after notice thereof
by the Company to the Participant; (ii) acts or omissions constituting gross negligence, recklessness or willful misconduct on
the part of the Participant in respect of the performance of his or her duties hereunder, his or her fiduciary obligations or otherwise
relating to the business of the Company; (iii) the habitual or repeated neglect of his or her duties by the Participant; (iv) the
Participant’s conviction of a felony; (v) theft or embezzlement, or attempted theft or embezzlement, of money or tangible
or intangible assets or property of the Company or its employees, customers, clients, or others having business relations with
the Company; (vi) any act of moral turpitude by the Participant injurious to the interest, property, operations, business or reputation
of the Company; or (vii) unauthorized use or disclosure of trade secrets or confidential or proprietary information pertaining
to Company business.


 




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For purposes of this Award
Agreement, “Retirement” shall mean a Termination of Service as an Employee due to retirement (as determined by the
Committee in its sole discretion) if such Termination of Service as an Employee (i) occurs on or after the completion by the Participant
of 10 years of employment with the Company (which employment need not be continuous), and (ii) the sum of the Participant’s
age and years of employment as an Employee equals or exceeds 70 (in each case measured in years, rounded down to the nearest whole
number).


 


5.          Adjustments.  
This Award and the Performance Goals shall be subject to adjustment as set forth in this Award Agreement and the Plan.


 


6.          At-Will
Employment.   This Award Agreement is not an employment contract and nothing in this Award Agreement shall be
deemed to create in any way whatsoever any obligation of the Participant to continue in the employ or service of the Company or
on the part of the Company to continue the employment or other service relationship of the Participant with the Company.  It
is understood and agreed to by the Participant that the Award and participation in the Plan or the Deferred Compensation Plan does
not alter the at-will nature of the Participant’s relationship with the Company (subject to the terms of any separate employment
agreement the Participant may have with the Company).  The at-will nature of the Participant’s relationship with
the Company can only be altered by a writing signed by both the Participant and the President of the Company. 


 


7.          Notices.
  Any notice required or permitted under this Award Agreement shall be deemed given when delivered personally, or when
deposited in a United States Post Office, postage prepaid, addressed, as appropriate, to the Participant either at the Participant’s
address set forth below or such other address as the Participant may designate in writing to the Company, and to the Company:  Attention:  General
Counsel, at the Company’s address or such other address as the Company may designate in writing to the Participant.


 


8.          Failure
to Enforce Not a Waiver.   The failure of the Company to enforce at any time any provision of this Award Agreement
shall in no way be construed to be a waiver of such provision or of any other provision hereof.


 


9.          Existing
Agreements.   This Award Agreement does not supersede nor does it modify any existing agreements between the
Participant and the Company. [Notwithstanding the foregoing, if the Participant is a party to an employment agreement with
the Company that includes provisions relating to the treatment of equity awards upon termination of the Participant’s employment
with the Company, then (i) the terms of this Award Agreement shall supersede the terms of such employment agreement solely with
respect to the treatment of the Performance Stock Unit award granted hereby upon termination of the Participant’s employment
with the Company due to Retirement as defined herein; and (ii) except as set forth on Exhibit A under “Vesting (Change
in Control)”, the terms of such employment agreement shall supersede the terms of this Award Agreement solely with respect
to the treatment of the Performance Stock Unit award granted hereby upon termination of the Participant’s employment with
the Company for any other reason.]


 


10.        Incorporation
of Plan.   The Plan and the Deferred Compensation Plan are incorporated by reference and made a part of this
Award Agreement, and this Award Agreement is subject to all terms and conditions of the Plan and the Deferred Compensation Plan
as in effect from time to time.  Notwithstanding the foregoing, this Award Agreement is intended to comply with Section
409A of the Code and this Award Agreement, the Plan and Deferred Compensation Plan shall be interpreted in a manner consistent
with such intent, and any provisions of this Award Agreement, the Plan or the Deferred Compensation Plan that would cause the Award
to fail to satisfy the requirements for an effective deferral of compensation under Section 409A of the Code shall have no force
and effect.


 




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11.        Amendments.
   This Award Agreement may be amended or modified at any time by an instrument in writing signed by the parties
hereto.  Notwithstanding the foregoing, the Deferral Election shall be irrevocable and the dates specified for distribution
of vested Award Shares may not be modified after the date hereof except as otherwise permitted under Section 409A of the Code.


 


12.        Withholding.
   To the extent that any Federal Insurance Contributions Act tax withholding obligations arise in connection with the Award
prior to the applicable vesting date, the Administrator shall accelerate the payment of a portion of the Award sufficient to
satisfy (but not in excess of) such tax withholding obligations and any tax withholding obligations associated with any such
accelerated payment, and the Administrator shall withhold such amounts in satisfaction of such withholding obligations.


 


13.         Section
409A. Notwithstanding anything to the contrary in this Award Agreement, no amounts shall be paid to the Participant under
this Award Agreement during the six (6)-month period following the Participant’s “separation from service” (within
the meaning of Section 409A of the Code) to the extent that the Administrator determines that the Participant is a “specified
employee” (within the meaning of Section 409A of the Code) at the time of such separation from service and that paying such
amounts at the time or times indicated in this Award Agreement would be a prohibited distribution under Section 409A(a)(2)(B)(i)
of the Code. If the payment of any such amounts is delayed as a result of the previous sentence, then on the first business day
following the end of such six (6)-month period (or such earlier date upon which such amount can be paid under Section 409A of the
Code without being subject to such additional taxes), the Company shall pay to the Participant in a lump-sum all amounts that would
have otherwise been payable to the Participant during such six (6)-month period under this Award Agreement.


 


[Signature page follows.]


 




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IN WITNESS WHEREOF, the
parties have executed this Award Agreement on the day and year first above written.


 





	 	REDWOOD TRUST, INC.
	 	 	 
	 	By:	 
	 	 	Andrew P. Stone
	 	 	General Counsel & Corporate Secretary
	 	 	One Belvedere Place, Suite 300
	 	 	Mill Valley, CA  94941
	 	 	 
	 	The undersigned hereby accepts and agrees to all the terms and provisions of this Award Agreement and to all the terms and provisions of the Plan herein incorporated by reference.
	 	 
	 	 
	 	[Insert Participant Name]
	 	c/o Redwood Trust, Inc.
	 	One Belvedere Place, Suite 300
	 	Mill Valley, CA  94941




 




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Exhibit
A


Performance
Goals


 


Target Shares: the number of
Target Shares per tranche is set forth below, in each case as the number may be adjusted to reflect cash dividends
declared and/or paid on the Common Stock pursuant to Section 2 of the Award Agreement:


 


Tranche A:
_____ target shares


 


Tranche B: 
_____ target shares


 


Tranche C: 
_____ target shares


 


Tranche D: 
_____ target shares


 


Performance Period: The performance
period for each tranche begins on the commencement date set forth below and ends on the earlier to occur of (i) the end date set
forth below or (ii) the consummation of a Change in Control (each, a “Performance Period”):


 


Tranche A: begins [insert
grant date] and ends on [insert one day prior to 2nd anniversary of grant date]


 


Tranche B: begins [insert
grant date plus three months] and ends on [insert one day prior to 2nd anniversary of grant date plus three months]


 


Tranche C: begins [insert
grant date plus six months] and ends on [insert one day prior to 2nd anniversary of grant date plus six months]


 


Tranche D: begins [insert
grant date plus nine months] and ends on [insert one day prior to 2nd anniversary of grant date plus nine months]


 


Performance Goals: For each tranche,
the number of Award Shares which will be eligible for vesting and crediting to the Participant’s Deferral Account, if any,
for the applicable Performance Period shall be determined based upon the Company’s cumulative total shareholder return (“TSR”,
as defined below) for the applicable Performance Period in accordance with the following schedule:


 


	
        Total Shareholder Return Goal

        (“TSR Goal”)
	 	% of Target Shares Creditable per Tranche 

(“Creditable Award Shares”)	 
	Less than [0]%	 	 	[0]	%
	[16.00]%	 	 	[100]	%
	[71.75]% or greater	 	 	[200]	%


 


If the actual performance results fall between
[0]% and [16.00]% TSR, or between [16.00]% and [71.75]% TSR, the actual number of Creditable Award Shares shall be determined based
on a straight-line, mathematical interpolation between the applicable percentages.  With respect to each tranche, in
no event shall the number of Creditable Award Shares exceed [200]% of the applicable number of Target Shares.  In the
event the TSR is equal to or less than [0]% at the end of a Performance Period, all Award Shares for such tranche shall become
ineligible for crediting to the Participant’s Deferral Account and shall be forfeited. For each tranche, any Award Shares
that are not eligible for vesting as of the end of the applicable Performance Period likewise shall become ineligible for crediting
to the Participant’s Deferral Account and shall be forfeited.


 


Notwithstanding the foregoing paragraph, in the
event that (i) a Performance Period ends upon a Change in Control and (ii) the Participant either remains in continuous employment
until immediately prior to such Change in Control or experiences a Termination of Service as an Employee prior to such Change in
Control and the Award Shares are not subject to forfeiture in connection with such termination under Section 4(c) of this Award
Agreement (including without limitation in connection with a Termination of Service by the Participation for Good Reason in accordance
with the Participant’s employment agreement), then the number of Creditable Award Shares will be determined by reference
to the applicable TSR Goal, pro-rated on an annualized basis to reflect the shortened Performance Period. For example, if a Change
in Control occurs one year after the commencement date of a Performance Period, then the TSR Goal to earn [100]% of the Target
Shares for the applicable tranche would equal [7.72]% and the TSR Goal to earn [200]% of the Target Shares for such tranche would
equal [31.04]%.


 




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Vesting (no Change in Control): If
there is no Change in Control during the Vesting Period, then any Creditable Award Shares shall vest and be credited to the Participant’s
Deferral Account on the last day of the Vesting Period, subject to the Participant’s continued employment through such date.


 


However, in the event the Participant experiences
a Termination of Service as an Employee by the Company without Cause (or, if the Participant is party to an employment agreement
with the Company, by the Participant for Good Reason) or due to the Participant’s
Retirement, death or Disability, in any case, prior to the last day of the Vesting Period, then any Award Shares held by the Participant
that are Creditable Award Shares as of such termination date or that become Creditable Award Shares following the termination date
in accordance with this Award Agreement (or, if the Participant is party to an employment agreement with the Company, in accordance
with such employment agreement in the case of a Termination of Service for Good Reason) may be reduced in accordance with Section
4(a) of this Award Agreement and, in any such event, shall vest and be credited to the Participant’s Deferral Account on
the later of such termination date or the last day of the applicable Performance Period.


 


Vesting (Change in Control): If a
Change in Control occurs during the Vesting Period and:


 


		(i)	the Participant remains in continuous employment until immediately prior to such Change in
                                                                 Control, then any Creditable Award Shares held by the Participant as of or due to the Change in Control shall remain
                                                                 outstanding and eligible to vest and be credited to the Participant’s Deferral Account on the last day of the Vesting
                                                                 Period, subject to continued employment through such date. However, if the Participant experiences a Qualifying Termination
                                                                 (as defined below) following such Change in Control but prior to or on the last day of the Vesting Period, then any
                                                                 Creditable Award                                                                  Shares
                                                                 shall vest and be credited to the Participant’s
                                                                 Deferral Account as of such termination; or



 


		(ii)	the Participant experienced a Termination of Service as an Employee, prior to the date of the Change
in Control, due to death, Disability, Retirement, without Cause, or, if the Participant is party to an employment agreement with
the Company, for Good Reason, in any case, then any Creditable Award Shares held by the Participant as of or due to the Change
in Control shall vest immediately prior to such Change in Control and shall be credited to the Participant’s Deferral Account
on the date of such Change in Control.





 


Notwithstanding the foregoing, in the event that
a successor corporation in a Change in Control refuses to assume or substitute for the Award, then any Creditable Award Shares
held by the Participant as of or due to the Change in Control shall vest immediately prior to such Change in Control and shall
be credited to the Participant’s Deferral Account on the date of such Change in Control.








 


Dividends: In the event a Change
in Control occurs during the Vesting Period and a successor corporation in such Change in Control assumes or substitutes for the
Award, then the number of Target Shares for each tranche shall be increased to reflect all cash dividends, if any, which have been
declared and/or paid to all or substantially all holders of the outstanding shares of Common Stock (and/or shares of common stock
of the successor corporation, as applicable) during the period beginning on (and including) the date of this Award Agreement and
ending on (and including) the applicable vesting date (such period, the “CIC Vesting Period”). On such vesting
date, the Target Shares for each tranche shall be automatically increased by an aggregate number of shares determined by multiplying
the number of Target Shares for each tranche by the Target Share Dividend Reinvestment Factor. Any calculations made pursuant to
this paragraph shall contemplate any necessary adjustments to the number of Target Shares for each tranche in accordance with Section
14.2 of the Plan in connection with such Change in Control.


 


Any amounts that may become payable in respect
of this “Dividend” provision shall be treated separately from the Creditable Award Shares and the rights arising in
connection therewith for purposes of Section 409A of the Code.


 






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Definitions:


 


“TSR” shall mean, for each
Performance Period, the Company’s cumulative total shareholder return (rounded to the nearest hundredth), expressed as a
percentage determined as the quotient obtained by dividing:


 


(A) the sum of:


 


(x) the Per Share Price as
of the Valuation Date for such Performance Period, plus


 


(y) the Per Share Price as
of the Valuation Date for such Performance Period multiplied by the TSR Dividend Reinvestment Factor,


 


by,


 


(B) The average of the closing prices of the Company’s
Common Stock during the sixty (60) consecutive trading days ending on the day prior to the first day of such Performance Period,
as set forth below for each tranche:


 


Tranche A: $______


 


Tranche B: Average of the closing
prices of the Company’s Common Stock during the sixty (60) consecutive trading days ending on ____, 20__


 


Tranche C: Average of the closing
prices of the Company’s Common Stock during the sixty (60) consecutive trading days ending on ____, 20__


 


Tranche D: Average of the closing
prices of the Company’s Common Stock during the sixty (60) consecutive trading days ending on ____, 20__


 


Notwithstanding the foregoing, the Committee shall
make appropriate adjustments in calculating TSR to reflect any dividends which may be declared during the sixty (60) consecutive
trading days prior to the end of a Performance Period, as determined by the Committee in its sole discretion.  


 


“Per Share Price” shall mean
the average of the closing prices of the Company’s Common Stock during the sixty (60) consecutive trading days ending on
the day prior to the applicable Valuation Date; provided, however, that for purposes of calculating the Per Share Price
in the event of a Change in Control the Per Share Price shall be the price per share of Common Stock paid in connection with such
Change in Control or, to the extent that the consideration in the Change in Control transaction is paid in stock of the acquiror
or its affiliate, then, unless otherwise determined by the Administrator (including in connection with valuing any shares that
are not publicly traded), Per Share Price shall mean the value of the consideration paid per share of Common Stock based on the
average of the closing trading prices of a share of such acquiror stock on the principal exchange on which such shares are then
traded for each trading day during the five consecutive trading days ending on and including the date on which a Change in Control
occurs.


 


“Valuation Date” means with
respect to each Performance Period, the last day of such Performance Period, as set forth below for each tranche; provided,
however, that in the event of a Change in Control that occurs prior to the last day of a Performance Period, the Valuation
Date shall mean the date of the Change in Control.


 


Tranche A: [insert one
day prior to 2nd anniversary of grant date]


 


Tranche B: [insert one
day prior to 2nd anniversary of grant date plus three months]


 




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Tranche C: [insert one
day prior to 2nd anniversary of grant date plus six months]


 


Tranche D: [insert one
day prior to 2nd anniversary of grant date plus nine months]


 


“Qualifying Termination” means a Participant’s
Termination of Service as an Employee (i) due to the Participant’s death, Disability or Retirement or (ii) within 24 months
following a Change in Control, either by the Company without Cause or, if the Participant is party to an employment agreement with
the Company, by the Participant for Good Reason.


 


“TSR Dividend Reinvestment Factor” means with respect
to each Performance Period, the number of shares of Common Stock that would have been acquired from the reinvestment of cash dividends,
if any, which have been declared and/or paid to all or substantially all holders of the outstanding shares of Common Stock during
such Performance Period, with respect to one share of Common Stock outstanding on the first day of such Performance Period.   Such
number of shares shall be determined cumulatively, for each cash dividend declared and/or paid during such Performance Period (beginning
with the first cash dividend declared and/or paid during such Performance Period and continuing chronologically with each subsequent
cash dividend declared and/or paid during such Performance Period (and in each case other than the first such cash dividend, taking
into account any increase in shares resulting from the application of this formula to the chronologically immediately preceding
cash dividend)), by multiplying (i) the applicable number of shares of Common Stock immediately prior to the record date of such
cash dividend (which in the case of the first cash dividend paid during such Performance Period shall be one) by (ii) the per share
amount of such cash dividend and dividing the product by the Fair Market Value per share of Common Stock on the payment date of
such dividend (or if such payment date is subsequent to the end of such Performance Period, the Fair Market Value per share of
Common Stock on the last day of such Performance Period).


 




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